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  • 1. Brian NearyFNGB 7430Dr. GeorgeFinancial Analysis Paper
  • 2. INDEXSections:1. Mission Statement- objective & strategy (pg.2)2. Economic Analysis (pgs.3-4)3. Industry Analysis- (pgs. 5-6)4. Company Analysis- (pgs.7-9)8. Financials Appendix- (pgs.10-13)9. Bibliography (pg.14)10. Endnotes (pg.15)
  • 3. Investment Objective The primary objective of the following stock investment analysis of TALBOTS Inc. is to offer a qualifiedopinion of the security, to therefore complement a well-diversified Equity Portfolio. The intention of theanalysis endeavors to achieve long term capital appreciation, stable returns, and sustainable growth basedupon the stock’s intrinsic value, and its related parameters: • Market capitalization less than $1 billion. • Firm must pay dividends or distribute cash to shareholders. • Firm must have a single product line or closely related product lines. • Firm must have been operating as a public company for a minimum of 10 years. Principal Strategy There are several inherent risks with investment in U.S. stock assets. The first regards performance risk.In general, stock values will fluctuate in response to the specific activities of a company, as well as to generalmarket conditions. Since shares are not bank deposits, they aren’t guaranteed or insured by the FDIC, SIPC,or any other government agency for default. Therefore, it may not be feasible to enforce a judgment againstthe issuers of the securities, possibly resulting in a total loss of the investment. Second, investment in securities involves market risk. Quite often securities may be illiquid, so they mayexhibit price volatility and an inability to execute timely divesture. There may also be differences in clearanceand settlement procedures effecting accurate settlements, and resulting in unforeseen losses. Currency riskis prevalent along with the typical risks associated with foreign securities. If the value of a local currency fallsrelative to the U.S. dollar, then the U.S. dollar value of the foreign security will decrease. Third, securities also have risks related to global economic and political developments. Several includeexpropriations, confiscatory taxation, exchange control regulation, limitations on foreign ownership or thetransfer of assets, as well as situations of regional social instability. Fourth, securities may be subject to regulatory risk. In general, overseas security exchanges and broker-dealers have less oversight by compliance entities than the U.S. markets. Foreign requirements may vary forproviding publicly available information. In the case of un-sponsored or unregistered depositary receipts theprimary issuers are under no obligation to distribute shareholder communications, or to convey any votingrights for the deposited securities. Moreover, U.S. accounting regulations, auditing, and financial reportingstandards may be subject to change. Lastly, there is no guarantee that any stock will ever achieve its investment objectives. The purchaseraccepts the speculative risk of the stock when taking a position. The company’s performance depends uponwhether or not the company’s internal management team is successful in applying the investment strategies.However, it is the investment analyst’s responsibility to render a fair and accurate assessment, with givenpublic information.
  • 4. Economic Analysis The first section encompasses a macro-economic overview of the specialty retail industry. There areapproximately 400,000 specialty retail stores currently operating within the United States and Canada.Aggregate annual sales revenues for the industry, as of FY 2007, amount to over $350 billion dollars. Thecurrent marketplace includes: shoes & clothing with $125 billion in revenues, electronics & appliances with$85 billion, jewelry with $25 billion, sporting goods $25 billion, books $15 billion, and various other productofferings like toys, music, luggage, and pet supplies comprising the remaining $75 billion.1The following chart represents the specialty retail cumulative market share: Toys, music, pet supplies 21% Shoes & clothing 37% Books 4% Sporting goods 7% Jewelry Electronics 7% 24% The determinants of demand are driven exclusively by the consumer. Therefore, specialty retail goodsrevenues are primarily affected by gains (losses) in consumer income. To a lesser extent, changes in taste, thepricing of related substitute goods, and the overall number of buyers in the market have an impact demand.The largest competitors, thru pricing power, are able to provide lower price points by making inventorypurchases in greater quantities. The smaller retailers compete thru differentiation. This is achieved byvariability in merchandise, higher quality expectations, relationship building, brand recognition, or providingan exemplary customer service experience. U.S. retail trade & industry sales, based upon economic data, represent approximately 6.4% of overallGDP (or $886 billion dollars). Therefore, the specialty retailers contribute an impressive 39.5% to the totalfigure. Also, there are 15 million workers employed either full or part-time within the industry. Thisrepresents over 10% of the entire workforce.2 As trade continues to globalize, loss of efficiencies and domesticwage pressures are resulting in more overseas capital investment. So, as industry transfers offshore and thegeneral labor-force shifts from a manufacturing to service-oriented economy, this upward trend will likelycontinue. As far as demographic data is concerned, retail sales figures are evenly dispersed throughout the country.Likewise, the specialty retail dynamic is interwoven throughout all strata of society. Depending upon theindividual business model, strategy is tailored to the appropriate location based upon recorded data of
  • 5. disposable income, age, gender, and preferences. The specialty retail industry is far more concerned with thecycle of consumer spending throughout the year. Timing of merchandise inventories, purchases, and salesinitiatives are tantamount to achieving sales objectives.The following chart diagrams the expectations for consumer spending and its schedule of potential cash flowsfor the current year FY 2008: There are several intangible risks that may affect these macro-economic forecasts. First, from a geo-political standpoint, there are several possibilities that may alter future earnings. Legislation and tradeagreements can have long term consequences for an industry. A move toward protectionism/nationalism mayimpact the importation of low priced goods. Also, a hike in interest rates or other fiscal policy initiatives mayhurt the consumer by straining purchasing power thru a weakened currency. Furthermore, unfavorablelegislation concerning import tariffs may injure trade relations and result in price appreciation. Secondly, a further downturn in the economy will affect the consumer’s disposable income. Corporatelayoffs, restructuring, and downsizing impair purchasing power. Corporate credit to purchase inventoriesmay dry up. Unemployment may rear its ugly head. Most feared of all, the bite of inflation, whether incommodities like oil or food prices, will negatively influence consumer spending habits by shaking confidence. Thirdly, social/cultural factors can shape forecasts. A shift in priorities and consumption habits mayaffect demand. This could produce a fundamental change in mindset of the average person, resulting from abacklash against materialism, environmental consciousness, a revival of the saving mentality, or the moveaway from a dependence upon asset-backed credit. Perhaps, even altruism will unfavorably impinge uponrevenues, with more people deciding to empower future generations. Lastly, a glut in international supply due to the overgrowth within competitive landscape can drasticallycut retail sales margins. It is doubtful that the specialty retail industry will ever achieve perfect competition,as the opportunity for choice and differentiation far outweighs supply. Rather, the concern is beinginundated with too much variety. A marketplace oversaturated with diversity can cause consumer paralysis,erode brand loyalty, and overwhelm the buying public with overbearing marketing campaigns.
  • 6. Industry Analysis The competitive landscape of the specialty retail industry is biased toward perfect competition. There aregenerally low barriers of entry, no proprietary technologies, low exit costs, low economies of scope/scale, andrelatively straightforward margins. However, the defining factor is differentiation. Unlike homogenousproducts like barbershops or pizza parlors, the business model can be shaped by differentiation,segmentation and building upon consumer tastes & preferences. As for business objectives, specialtyretailers compete across several market segments or demographics within a specific product classification. Specialty retailers, unlike department stores or Mega-retailers like Wal-mart, encompass a singular orlimited product focus. However, they offer a much larger selection of items within each designatedmerchandise category. The business model most resembles the independent operator/franchise structure.The archetypal specialty retailer operates a single store, with annual revenue under $1 million dollars. Someof the more notable big-box specialty retailers are Ann Taylor, Liz Claiborne, Tommy Hilfiger, Polo RalphLauren, Gap, Best Buy, Sports Authority, Barnes & Noble, Zales, Virgin Music, Apple, and Toys "R" Us. Yet,despite the presence these large chains, the market remains highly fragmented. Barnes & Noble, forexample, has 900+ brick-an-mortar locations as well as an online relationship with Amazon, but maintainsonly 15% of total market share within the book segment. Accordingly, these independent Strategic business units (sbu’s) acquire physical locations, hire, train, andsupervise store personnel, purchase wholesale products, manage inventory, and marketing initiatives.Funding and credit initiatives may be provided by the head corporate office. They may operate stand-alonestores, leased space in shopping centers, or in the case of Ralph Lauren and Bloomingdale’s, lease space indepartment stores. Retailers with more than one store often operate one or several distribution centers thatreceive all merchandise from directly from manufacturers. Otherwise, purchase and delivery contracts areindependently arranged. The most important scope of operations for many specialty retailers is merchandise timing, particularly infashion-driven markets like women’s clothing and computer games. The company I am analyzing, Talbots, isa mid-premium men’s & women’s specialty clothier. In order to maximize profits, merchandise decisionsmust be made months ahead of the actual receipt of the product in stores, especially coinciding with seasonalwardrobe changes. Many products are consigned at trade shows. The fashion world, in particular, has diverse sources ofinformation about new products, and all are driven by innovative design concepts and trend analysis.Product purchasing terms vary widely by market. In the retail book market, virtually all unsold bookpurchases can be returned to publishers at full credit. However, in the clothing industry, returns of unsolditems to the manufacturer are uncommon as all sales are final. Inventory management is closely tied to merchandising. An accurate inventory information system willidentify the popular items, and weed out the poor sellers. Again, in the apparel segment, seasonal productadjustments and inventory management are essential to profitability. This factor is necessitated by thecrowded space of the market, as it has a higher than average concentration of specialty retail competitors. As
  • 7. the product life cycle in retail apparel is literally “seasonal” high turnover is greatly desired. With this inmind, innovation & technology have little importance to clothing and apparel opposed to well-defined producttrends. The greatest downside risk is missing a trend and purchasing an unpopular clothing line. Barriers to entry are relatively low in the clothing segment, and can be rather high in the computer andelectronics segment, often having to purchase several million dollars worth of inventory. Growth prospectsvary across the product spectrum. Computers and electronics are dependent upon technology innovations.The Apple iphone, Blu-Ray DVD, flat panel LCD TVs, and various improvements to existing products keep thecycles short. Toys, book, sporting goods, and jewelry are relatively standardized and dependant uponseasonal demand. Clothing and apparel have both seasonal and trend characteristics. Industry Growth is clearly tied to disposable income and relative prosperity. The current downturn in theU.S. economy is being reflected in declining sales, reduced foot traffic in stores, and a slump in onlinetransactions.3 Being the largest consumer nation in the world, and consequently the largest debtor nation,when domestic consumption declines, the rest of the global community follows. “As the U.S. goes, so goes theworld.” The Michigan Consumer Confidence survey, shown below, reflects the downward trend of sentiment: Our largest trading partners are beginning to feel the effects of the U.S. economic woes. Manufacturingorders are slowing. Also, the downturn in the financial industry is making credit hard to come by, forretailers looking to finance inventory during the upcoming holiday season. The only wildcard is the wholesalemanufacturing industry supplying the domestic specialty retailers. With the majority of partners beingoverseas (China, S.E. Asia, India etc.) the lack of wage pressure enables the suppliers to keep costs down, andprices low. Therefore, they can pass these benefits onto their customers, and retain satisfactory profit levels.The remaining threat is continually climbing commodity, fuel and raw material charges that are negativelyimpacting COGS, with no measurable relief on the horizon. However, as global inflation expands, and price pressures creep into developing economies, the businessrisks increase. Wage pressure, unionization, labor laws, modernized legislative policies & political reform willeventually weigh upon the emerging markets. Also, cutthroat competition may re-ignite tariffs and subsidies,and other unfair commercial policies. So, to conclude, growth prospects in the specialty retail industryremain tenuous at best, particularly for companies heavily reliant upon the emerging market labor force.
  • 8. Company Analysis The company I have chosen for this analysis is Talbots. The business model for Talbots functions as amid-premium clothing specialty retailer & direct marketer of women’s apparel, shoes, and accessories. Thecompany operates in two segments: Retail Stores and Direct Marketing. The brand operates stores in theUnited States and Canada. In addition, they have two online stores at or offers a collection of classic sportswear, casual wear, dresses, coats, sweaters, accessories and shoes,consisting almost exclusively of its own branded merchandise. Categories include misses, petites, womanand woman petite sizes. The J. Jill brand, a recent acquisition, is also a multi-channel specialty retailer ofwomen’s apparel. The company was founded in 1947, and is based in Hingham, Massachusetts. There arecurrently over 16,000 employed associates. Its key business demographic is the 35+ year old female. The company’s retail stores segment encompasses locations in 47 states, Canada, and the United Kingdomunder the Talbots and J. Jill brand names. There are a total of 1,421 stores, with 1,150 stores under theTalbots brand & 271 stores under the J. Jill brand. Corporate HQ operates 862 locations, with 595 locationsunder Talbots and 267 locations under the J. Jill. Approximately 75%-80% of the floor area of all retail storesis devoted to selling space (including fitting rooms), with the remainder being allocated to stockroom andadministrative purposes. Talbots has 47% of its store locations in specialty centers, 37% in malls, 7% invillage locations, 5% as freestanding store locations, 2% in outlet locations, and 2% in urban locations. 4 The company’s direct marketing segment has been a cornerstone for the business. The first direct mailingwas in 1948, with 3,000 fliers distributed. During FY 2008, Talbots’ direct marketing business segmentrepresented 19% of total company sales, with the Internet channel comprising 56% of its total directmarketing sales. There were 126 million catalogs distributed last year. The company issued 25 separateTalbots mailings across the product spectrum, with a circulation of approximately 48 million. Also, it issued15 separate J. Jill brand catalogs with a circulation of approximately 78 million. 5 The combined annualized revenues for the company were $ 2.289 billion dollars in FY 2007. Talbots has amarket cap of $781 million dollars, with 55.52 million shares outstanding. The dividend is 52 cents pershare, with an approximate yield of 3.7%. Sales increased $51 million or 2.5% y.o.y. However, EPS droppedto -$3.56 p/share from .59 cents a share in FY 2006. This was due to a net loss recorded from “goodwillimpairment” and its associated charges related to the J. Jill acquisition. The impairment was a direct resultof the fair value of net assets (intangible assets, trademark, and tangibles) being reported at higher than theassessed carrying value. So, a re-valuation was made, and a $149.6 million one time write-down charge wasnecessary to reflect the actual market value of the assets. Regarding growth, the company has added 298 stores since 2005, and revenues have increased 26.5% inthe same time frame. Profitability has had mixed results. Cash provided by operating activities has increasedby $91 million. However, net working capital has been decreasing. The added burdens of accounts payable,increased debt liabilities, and capital expenditures have strained EPS. Also, cost of sales, inventorypurchases, and occupancy charges have increased 6% y.o.y, affecting operating income. Long term debtobligations payable now total $418 million; with $95 million due in 12 months, $261 million maturing in 1-3years, and $62 million due in 3-5 yrs. This debt is from the J. Jill acquisition on July 27th, 2006. 6
  • 9. SG&A has jumped 126% from FY 2006, as the acquisition, and expansion efforts have dramaticallyincreased. COGS have also risen 34% from FY 2006, as operations have expanded. Capital expenditures forthe year were $84 million. The trend is moving lower as a significant portion of cash flows are beingredirected to long-term debt payments, payments on working capital lines of credit, and dividend payments.From this analysis, the negative affects to cash flow will continue until the long term debt issues are retired in2012. The overall stock price performance has been on a slide, thus reflecting the downturn in consumercyclical purchasing power. Closing price is $14.07, off from a high of $50.57, and an IPO of $11.00 p/share. 7The following chart represents the percentage price performance increase (decrease) of Talbots since inceptionas compared to overall returns for the market & related economic indicators: -TLB- -S&P 500 Index- -Russell 2000- -Consumer Discretionary- -US Dollar Index- -Discount Rate- Data as of August 1, 2008. The firm’s capital structure (the composition of its liabilities) is 59% equity-financed and 41% debt-financed. The debt to equity ratio is .69, with financial leverage higher than the industry standard. There is$543.6 million of total debt outstanding with an average interest rate of 3.6%, or LIBOR +.35 basis points.This has impacted Return on Assets (-12.5% FY 2007) which is lower than the rate of interest on the debt,from exposure to the real estate market. The effective tax rate is 37.5%. Net interest expense is a hefty $24.5million, opposed to $3.1 million in 2005. The Cash Distribution and Dividend policy is tied to earnings,operations, financial conditions, capital & cash requirements, as well as the business forecast. Prior payoutshave been averaged 3%. However, as most dividend decisions made by the board were in times of low long-term debt, the future of the dividend may be in doubt. The 5 yr Price Earnings Ratio (43.8 high, 10.1 low)was 3 times the industry average (13.4 high & 4.1 low) respectively. 8 In regard to forecasting future sales, the 3-5 year expectation should be a modest 2.6% based upon retailex-post industry data provided by the National Retail Federation, and the Bureau of Economic Analysis.Therefore, excluding the one-time impairment charge, Net Income should average $28 million per year, for the3-5 year period, with an EPS average estimate of .50 cents p/share. However, the figures could be diluted byincreases in occupancy rates, and general operating costs. Free cash flows will continue to be negativelyimpacted by debt & interest payments, but may be somewhat offset in a reduction of investment in PP&E, anda potential cut to the dividend.
  • 10. The intrinsic value of the stock can be determined from several methodologies. The model employed willcompute the ensuing intrinsic value accordingly. Methods include cash distribution, earnings, residual value,and free cash flows. The calculations will assume a risk free rate of 3.20% from the 5 yr treasury, a Beta of -.85, k= rate of return, g= 3% growth, and a 5 year time horizon. The formulas used for the following resultsare located within the endnotes*.ROE: -0.4152 (-188.841/454.799)WACC: 2.124 [(781.166/1325.26)*3.169] + [(543.6/1325.26)*(1-.375)]ROR: 3.70% (.50/14.07) + .0261P/E: 71.42 [.50/(.037 - .03)]Div Disc5: $11.73 [14.07*(1.037)5PV0:= $ 7.65 [(.52*1.03)/(3.7%-3%)]Residual Val of firm: $ 5.82 [3.39 + (-1.37-2.124) / [2.124 – 9.03 * 3.39(5-1)]Intrinsic Val p/s $ 8.77 (323.1-781.16)/52.2 Clearly, from the variance in valuations using the different pricing methods, the market value of thecompany is overestimated, relative to the available financial data. From these numbers one can infer that the$14.07 has priced in a 10.25% risk premium to the average rate. Therefore, as the stock seems “rich” relativeto fundamentals, a further downward correction seems likely. Lastly, Talbots Inc. has no corporate bond issues outstanding, as the bulk of its debt is in the form of aterm loan, obtained thru private financing. Therefore, S&P or Moody’s do not maintain a standing financialrating. However, the present S&P quality ranking for Talbots is B, which would roughly translate to 2nd tiercredit quality rating. 9 The Bottom Line To conclude this analysis, I would like to offer my estimation upon the overall value of Talbots Inc. Basedupon the fundamental data, the company will most likely remain within a trading range of $12-$14 dollarsper share, for the foreseeable future. With a substantial debt repayment due, the free cash flows will beaffected, and cash disbursals may be cut. Also, the U.S. economic picture is still predisposed toward furtherturbulence within sub-prime debt, asset-backed securities, Alt A loans, and the inability for municipalities toprocure debt instruments. With credit drying up, interest rates set to rise, more potential volatility incommodities, and the possibility of state and local tax hikes to make up for liquidity shortfalls, the consumerwill be strapped for cash. Therefore, the downturn in retail will probably continue. I would be a buyer after the largest debt pay outis disbursed in 24 months. If I currently were a holder of the shares and a growth player, I would sell basedupon poor earnings prospects. However, if I was a long term value player, I would hold the stock until itbecame apparent the dividend would be cut. Then, the impetus would be to sell. Again, as the company’sexposure is based entirely upon the U.S. retail market and is driven by disposable income, the risks outweighthe reward.
  • 11. Financial Appendix
  • 12. Valuation Ratios Company Industry Sector S&P 500P/E Ratio (TTM) -- 17.9 6.68 19.75P/E High - Last 5 Yrs. 43.8 13.4 26 23.21P/E Low - Last 5 Yrs. 10.1 4.1 11 6.97Beta -0.85 0.92 0.88 0.98Price to Sales (TTM) 0.35 0.16 0.43 2.28Price to Book (MRQ) 1.74 3.38 1.89 4.43Price to Tangible Book (MRQ) 6.58 4.32 1.91 8.11Price to Cash Flow (TTM) -- 0.91 2.00 10.92Price to Free Cash Flow (TTM) 15.38 17.11 11.39 43.23Dividends Company Industry Sector S&P 500Dividend Yield 3.70 0.05 0.04 2.53Dividend Yield - 5 Year Avg. 1.93 1.21 1.35 1.84Dividend 5 Year Growth Rate 8.24 16.28 23.58 11.82Payout Ratio(TTM) -- 3.66 13.03 36.78Growth Rates Company Industry Sector S&P 500Sales (MRQ) vs Qtr. 1 Yr. Ago -5.43 7.81 3.83 11.21Sales (TTM) vs TTM 1 Yr. Ago -3.97 1.38 3.01 13.31Sales - 5 Yr. Growth Rate 7.85 9.80 9.97 14.91EPS (MRQ) vs Qtr. 1 Yr. Ago -68.43 61.50 1.86 43.28EPS (TTM) vs TTM 1 Yr. Ago -2,187.88 -- -- --EPS - 5 Yr. Growth Rate -- 10.18 15.98 19.19Capital Spending - 5 Yr. Growth Rate -5.75 16.07 14.59 12.99Financial Strength Company Industry Sector S&P 500Quick Ratio (MRQ) 0.71 1.51 1.19 0.89Current Ratio (MRQ) 1.36 2.14 1.52 1.08LT Debt to Equity (MRQ) 56.01 12.47 33.09 111.80Total Debt to Equity (MRQ) 103.90 19.59 65.06 153.19Interest Coverage (TTM) 1.46 0.90 0.19 19.67Profitability Ratios Company Industry Sector S&P 500Gross Margin (TTM) 32.19 3.82 12.82 35.15Gross Margin - 5 Yr. Avg. 34.88 41.51 26.57 36.15EBITD Margin (TTM) -2.82 -- -- --EBITD - 5 Yr. Avg. 8.88 12.98 12.34 19.16Operating Margin (TTM) -8.71 1.33 3.34 --Operating Margin - 5 Yr. Avg. 3.63 11.59 8.02 18.21Pre-Tax Margin (TTM) -10.08 1.37 3.44 15.06Pre-Tax Margin - 5 Yr. Avg. 2.94 11.73 8.36 17.97Net Profit Margin (TTM) -8.52 1.01 1.99 11.05Net Profit Margin - 5 Yr. Avg. 1.39 6.77 5.07 12.64Effective Tax Rate - 5 Yr. Avg. 52.62 38.48 36.89 30.52Management Effectiveness Company Industry Sector S&P 500Return on Assets (TTM) -12.01 1.90 2.27 6.74Return on Assets - 5 Yr. Avg. 2.18 9.85 4.48 7.40Return on Investment (TTM) -16.51 2.62 3.63 9.33Return on Investment - 5 Yr. Avg. 2.78 14.45 6.75 9.89Return on Equity (TTM) -35.20 3.38 6.25 18.02Return on Equity - 5 Yr. Avg. 4.51 15.55 9.94 20.35Efficiency Company Industry Sector S&P 500Revenue/Employee (TTM) 358,441 159,556 30,711,657 873,899Receivable Turnover (TTM) 9.99 2.60 5.06 9.14Inventory Turnover (TTM) 4.57 0.44 4.85 7.16Asset Turnover (TTM) 1.41 0.15 0.49 0.66
  • 13. BibliographyNational Retail Federation of Economic Analysis Online Reuters & Poor’s University of Michigan Talbots, Inc.
  • 14. End Notes 1. Data provided by the Bureau of Economic Analysis: GDP and Retail Dispersion 2. Data provided by the National Retail Federation: FY 2007 results 3. Chart figures and Data taken from University of Michigan Consumer Confidence Survey 4. Dispersion and relative data taken from Talbots Inc. Annual Report 5. Sales distribution data from Hoover’s Company Report 6. Figures from Talbots Annual Report 7. Stock information provided by & comparative chart created in Thomson Reuters Analysis tools 8. Relevant figures taken from Talbots Financials 9. Talbots stock rating from S&P FinancialsFormulas:1.) Debt/Equity ratio= total Long Term Debt / total equity2.) ROE = NI / common equity = (NI / net sales) * (net sales / common equity)3.) WACC= [(total mkt value of equity / K) * cost of equity] + [(total debt / K) * cost of debt (1- taxes)] Where K= total debt and leases + total market value of equity Cost of equity= (market risk premium * Beta) + risk-free rate4.) Req ROR= TVM * (Risk Free Rate) + inflation premium + risk premium, Beta is systematic/market risk5.) ROR= EPS1/P0 + Inflation Premium; therefore . . . . . (Required ROR = WACC)6.) Intrinsic Val P/E= D1 / (k-g) where k=ROR7.) DCF- Stock = SUM [CF t / (1+k) ^t], where k equals required rate of return, t = time8.) PVFCF to Equity= NI + Dep Exp – Cap Ex – chg in Working Cap – Debt repaid + new debt9.) Net operating assets: Total assets excl. cash & cash equivalents, less current liabilities excl. short-term loans and bank overdrafts.10.) Residual Val of the firm= NOA+ (ROIC – WACC) / WACC – g * NOA (t-1) (constant)11.) Intrinsic Val P/share= Val of firm – market value assets – market value preferred + excess assets / shares12.) IV0 = Book Val 0 + sum [EPSt – k * BV(t-1)] / (1+k) ^ t + (terminal value)BV(residual) * {IV(T) / BV(T) -1] / (1+k) ^ t + BV t-1*(ROE T- k) / (1+k) ^ t (where T= non-constant growth horizon)